S.S.SANDHAWALIA, J. - (1.) THIS set of income tax references at the instance of both the Revenue and the assessee raises certain interesting questions of interpretation. As common questions of law and fact arise, I propose to dispose of them by this single judgment.
(2.) THESE references pertain to two asst. years 1964 65 and 1965 66 of the assessee, Saraswati Industrial Syndicate Ltd., Yamunanagar, for which the respective accounting periods ended on the 31st of Aug., 1963, and the 31st of Aug., 1964. In the relevant statements of the case, as many as nine questions in all have been framed, but I propose to deviate from the serial order therein and first take up the two questions at the instance of the Revenue. Saraswati Industrial Syndicate Ltd. is a company carrying on the business of manufacture and sale of sugar and machinery for sugar mills and other industries. During July, 1963, its managing director visited Japan in connection with the company's business. A deduction of Rs. 11,922 on account of expenses was hence claimed by the company. The ITO disallowed the company's claim primarily on the ground that this expense was of a capital nature because the tour to Japan was undertaken with a view to enter into a collaboration agreement with a Japanese firm for the setting up of a unit for the manufacture of cement machinery. The AAC upheld the ITO's finding on this point. On further appeal, the Tribunal found on facts that the company had already manufactured and sold cement machinery worth a little less than a lakh of rupees and that the tour of the managing director was not undertaken for the purpose of entering into a collaboration agreement for setting up a new venture, but it was for, the purpose of improving upon the working of a venture already in existence, and for increasing its efficiency and output. The Tribunal, therefore, accepted the contention of the company that the amount claimed was a revenue expenditure. From these facts, the following question has been formulated : "Whether, on the facts and in the circumstances of the case, the amount of Rs. 11,922 representing travelling expenses of the managing director is allowable as a revenue expenditure -
(3.) MR . D. N. Awasthy, on behalf of the appellant Revenue, primarily contended that the tour of the managing director was solely for the purpose of signing the collaboration agreement and it was after this had been done that a new venture for the manufacture of cement machinery was set up. On these premises, he contended that the expense was of a capital nature.;